A $0.50 tax on lemons currently generates $200 in revenues per day. If the tax were increased to $2, the revenues generated would drop to $70. This tells you that in this range of tax rates the:

A. quantity effect outweighs the price effect.
B. quantity effect outweighs the income effect.
C. price effect outweighs the quantity effect.
D. price effect outweighs the income effect.


A. quantity effect outweighs the price effect.

Economics

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